Friday, August 23, 2013

“Due to the number of weekly options now trading, every Friday turns out to be an options expiration pin as you saw today with the market barely moving and often closing Thursday very close to the pin for minimal percentage moves on Friday, except in to the last 1 to 2 hours as most options contracts are cleaned up, then the market starts moving and it doesn’t have to have anything to do with real direction, it can be a head fake move, it can do a lot of things, but it’s generally not that important except for the 3C signals near the close, they tend to pick up where they left off on Monday (the next trading day).

Here’s what we have…

SPY Ascending Triangle today (Bullish technical price pattern). *Bulls will chase the breakout, look for a failed breakout or head fake move leading the market below the apex of the triangle.

SPY 5 min intraday chart, these suggest weakness in to the new week, perhaps early Monday or all of Monday.

Remember, VXX should give the opposite signal of the SPY to confirm as they move inversely? Here’s the VXX 1 min , it’s leading even higher now, this is why I took the chance on the VXX call position.

I was in the middle of collecting these two SPY charts when things got exciting, NEVER fall asleep at the wheel during a dull market, they’re the most dangerous.

To me the 2 min chart looked like we’d either be seeing some downside in to the close (which is exactly what was called for Friday afternoon as well as last night, “Early weakness this week”) or it would hit tomorrow morning if we ran out of time.

*Keep in mind we’ve lost some intraday ground from the highs, but the SPY is still only down -.38% or so.

This 5 min chart looks worse than it did Friday when I said I expect weakness early this week, at this point as the second chart in the capture you can see price was already moving.

This 10 min chart is kind of the Maginot line between the positive 15 and weakness. The 15 min is still positive.

One of the reasons I decided to close the VIX position was, “It was opened for a short term move of weakness in the market”, we got that short term move even though we have some indications for more.

You know I prefer to close options in to volatility. Friday’s position was added to today and it made it bigger than a spec. position so I don’t want to sit on that very long and I added a new position (Same VXX Sept. $14), this is not the kind of risk management I would condone, but to me it looked like a very promising position and I suspected I’d know before the day was out.

Here’s the P/L on the positions and then a few more reasons for closing them.

The original position was added to to bring it up (75) again, not something I condone, but when I see an edge I find it very hard to walk away from it.

The 25 add to was at $1.14 bringing the average to $1.31 (this capture is 15 min. delayed)

With the first fill of 25 at $1.48 and the second fill of 50 at $1.49 the average came out to be +13.5%or about +$1325

I didn’t get the portfolio capture of the second position, but here’s the purchase at $1.14 for 25 contracts.

At the fill of $1.49 the gain is almost +31% for about 1/2 a day of market exposure.

Here are a few other reasons I wrapped up the VIX position (remember these short term options positions are using that kind of leverage specifically because they are short term).

Other averages weren’t confirming like the SPY.

This is the DIA 3 min chart, the SPY 5 min was clearly leading to the downside, but a faster DIA was getting tangled up.

The IWM 1 min chart looks right for letting the VXX position open, but…

At 2 mins again unlike the SPY, things start to get tangles up, the depth of the weakness across multiple averages is not clear.

The QQQ 2 min was showing a relative positive divergence, while there can certainly still be downside from here or even probably best case scenario some lateral trending, this can’t be discounted as the start of a positive divergence and typically signals at least a consolidation if not a bounce to the upside intraday EITHER ONE WOULD KILL THE MOMENTUM ON THE POSITION.

The QQQ 3 min just confirms

The NYSE TICK which was mentioned earlier today went from VERY dull to very negative at -1700, but like the averages above, the water was muddied with TICK readings after that in the +1200 range so the number of stocks falling had given way to a large number rising during the sell-off, this told me things are not all clear on the downside and the positions that was meant to be short term should be honored as that.